10/12/2012 11:14 am ET Updated Dec 12, 2012

Four Steps to Educate Students About Personal Finance

As I was reading an article this week on student loan debt, I began to think about all of the debt my wife and I have incurred throughout our life together. I think about the credit card I got during my freshman year in college because it was supposedly "a good way to build my credit." I reminisce on the student loan debt I incurred during my years in college. I remember how nervous I was when I signed the mortgage note on my first home when I was barely old enough to rent a car.

My personal favorite was the major credit card I signed up for at a baseball game so I could get a Cincinnati Reds baseball cap. Three years later, I couldn't tell you where that cap went, but I can definitely tell you that I was in over my head in debt with that credit card. I actually paid it off multiple times, yet they kept increasing my limit. So I kept spending it.

Years later, having paid off all of this debt and having a totally different frame of mind as it relates to personal finance, I wonder what it would have taken to have prevented me from making all of those financial mistakes so early in my life. What happened between then and now that changed my way of thinking? It was education in the subject matter and the stress that the lack of personal financial knowledge brought on me and my household. I simply had no guidance on this matter coming out of high school.

Troubling Statistics about Money Management

According to Charles Schwab's 2011 Teens & Money Survey, 77 percent of teens surveyed believe they are financially savvy about money, yet only 35 percent confess to knowing how to balance a checkbook or manage a credit card. A mere 31 percent understand how credit card interest and fees work. Incredibly, only 22 percent of these teens surveyed understand how income taxes work.

These are astonishing figures! Today's youth think they know about personal finance, yet they confess to not knowing things that form the base of the personal finance pyramid. The scariest figure in the survey is that 77 percent of those surveyed say that their parents have been great role models when it comes to money management and have taught them a lot. Our younger generation is learning their money habits from the most leveraged generation in United States history, and we as a nation are doing very little to stop this cycle. Our government can't even agree on a budget. Our answer is to simply borrow and lend more money. We must break the cycle.

I could have personally avoided my debt had someone or some institution been more active in presenting personal finance education to me. This education has to start in our schools. According the 2011 Survey of the States by the Council for Economic Education, only 13 states require their students to take a high school course in personal finance prior to graduation. Of those 13 states, only five require student testing in order to complete this requirement. That's a mere 10 percent of our states that are properly educating the younger generation on topics relating to personal finance.

I was never even offered a personal finance class. This is where the problem lies. We as a nation are simply not teaching this vital life skill to the younger generation. The solution to our financial problems is not lending more money or making interest rates cheaper. The solution is found at the core, and that is the education of the next generations regarding personal finance. We must teach students about the pitfalls of credit cards, how to balance a checkbook, how a loan works and what an amortization schedule looks like, or our situation will never change. We are sending these graduates out into the real world to fight a battle with nothing more than a paper sword. They are about to incur the most amount of debt in their lives in the few years following high school, and it is imperative they understand how to win this battle.

How to Educate Students about Personal Finance

So, how do we solve this problem? Here are four steps.

1. Personal finance education must begin at home. Parents must actively counsel their children as to how income, credit cards, loans and bills work. They must also impart the concept of saving and not just spending.

2. Local schools should offer personal finance classes to high school students, and require them to take it and pass it as we would with any other class.

3. Students can get online and educate themselves. There is some personal accountability here that students must realize. There are plenty of options out there to assist in this area. The FDIC, for example, offers its Money Smart program for free. Also, there are many community programs out there for citizens that are looking to get some free guidance in personal finance subject matters.

4. Force yourself to take a personal finance class in college. By that time, you will begin to see the world a different way than you did in high school. As a result, you will also see personal finance a different way. I promise that you will not regret the time you invest in educating yourself in this vital topic.

More than likely, the most stressful part of your adult life will be centered on money at some point. Money problems can cause distractions at work leading to lost productivity and maybe even loss of employment. They could also lead to problems at home, including fighting and often divorce. If you are willing to invest in counseling for other life problems, why wouldn't you invest in personal finance education, which could minimize some of these stressful situations down the road? Be accountable and proactive in educating yourself in personal finance, and I promise you won't regret it!